Buy Now and Pay Later (BNPL) offered at many online checkouts as an alternative payment method to credit cards and loans is meant to be an easier solution allowing you to as the name suggests buy something now and pay later.  Usually payment is made in full 30 days after purchase or there are three small and manageable payments over a fixed period of time. Simple in its concept BUT can all of those small payments add up to payments you cannot actually keep up with? 

With confirmation by all three Credit Reference Agencies in the UK that BNPL agreements will be added to your credit report, same as any other credit that you have,  I for one agree that this is a good thing.

If all other credit you have can count either for or against you then hopefully this will help those with lower credit scores or little or no credit history prove they can pay their debts back and help increase their credit ratings perhaps? It also ensures the playing field is kept fair,  as surely credit is credit and should be treated as such? It will help not only you but relevant finance providers confirm if you can keep up with the repayments.

What are your thoughts on this? We thought it would be really helpful to take a look at  the ‘buy now pay later’ options as opposed to using other forms of credit.

Which leads us onto the more tricky part of deciding if you are best to use BNPL or a more standard form of borrowing, we thought this Money Saving Expert Chart was really useful in comparing the two:

BNPL vs 0% credit cards vs 0% overdrafts

	Buy now, pay later	0% credit card	0% overdraft
Section 75 protection?	Not yet	Yes	No
Can I complain to ombudsman?	Not yet (1)	Yes	Yes
Does it do a hard credit check?	No (1)	Yes	Yes
Do I get quick access to credit?	Yes	No	No
How long do I have to repay?	Usually up to six weeks	Up to 23 months	Up to 12 months (2)

(1) Except with Monzo Flex & Instalments by Barclays. (2) Some lenders also offer overdrafts that are interest-free for an ongoing period. For example, First Direct offers overdrafts where the first £250 overdrawn is interest-free, but charges 39.9% EAR variable above this.

Source: Buy now, pay later: how it works and what to look out for – MoneySavingExpert

Although BNPL provides you with a convenient and easy form of payment, it’s important to keep in mind that missing a payment when it is due or not having enough funds could result in fees and penalties being incurred.  In addition the convenience of BNPL schemes could tempt you to make purchases you may not have necessarily made, so always consider if you actually need to make the purchase and whether you will have the funds to pay when payment(s) become due.

As of the Summer of 2022 on credit reports from TransUnion BNPL information will be visible, with the other two Credit Reference Agencies following shortly after. It will not affect or impact your credit score immediately but may do over time as reporting evolves. Any companies who you do have any  BNPL agreements with should let you know if your agreements will be appearing onto your credit report. 

Another really great bit of news for consumers is that the FCA is likely to begin developing its own rules to regulate BNPL providers. Whilst researching for this blog I found that  BNPL is largely unregulated, as per the chart above confirming that you are not yet able to take any complaint to the Financial Ombudsman, so the fact there are steps being taken to bring this in line with all other financial institutions its really good news for consumers. 

Currently, here at ScoresMatter we do offer a Loan Affordability calculator that will help you to determine if you can afford additional monthly payments and  our customers can check this before taking out any additional credit agreements. ScoresMatter also provides its customers with access to their reports from TransUnion, so our customers will be some of the first to see BNPL information on their credit report. 

So, will you be using  “buy now, pay later”? Or sticking to a more ‘traditional’ form of financing? We hope we’ve given you enough information to make an informed decision. 

Information provided in this blog is for informational purposes only and does not constitute  financial advice. Taking out any kind of credit will impact your Credit Score.